How digital ad marketplace MoPub can help expand Twitter’s umbrella

These days, the term “social media company” is a bit misleading. Platforms like Facebook (s fb) and Foursquare are turning to new outlets to address challenges outside of social. Facebook, for instance, is tackling communications and internet accessibility, while Foursquare is trying to license its location data. Over time, they start becoming new companies entirely — social on the surface, but powered by tools that do so much more.

Twitter (s twtr), too, is experiencing that growing pain. Doubts have swirled within the past week about Twitter — marked particularly by the exit of COO Ali Rowghani and media head Chloe Sladden — and its ability to create a sustainable revenue stream and product that makes investors happy. Monetizing through ads and media partnerships has been at the forefront of Twitter’s strategy to grow, and the shift at the highest levels of the company have raised questions about whether that is possible.

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But Twitter is on the verge of making major moves with MoPub, the mobile-focused ad marketplace the company acquired in October of 2013. MoPub can do more than help Twitter monetize its ads — in fact, what the company can do outside of Twitter that can really make a difference.

What is MoPub?

As it stands now, mobile app advertising is still relatively young, but in recent years it has condensed into just a handful of big marketplaces. Currently, MoPub is the largest mobile-only ad exchange, serving 1 billion unique devices, with competitors including Millennial Media and the mobile arm of Google’s DoubleClick.

Founded in 2010 by former Google and AdMob engineers Nafis Jamal, Bryan Atwood and Jim Payne, MoPub hooks up publishers and app developers directly to sell ad space across multiple ad networks. For example, if HalfBrick wants to sell ad space on its popular game “Fruit Ninja,” MoPub will prioritize ad inventory to the highest available bidder in real time. Before it was acquired, MoPub said that it at reached a $100 million revenue run-rate in Q1 of 2013.

Twitter acquired the company for $350 million last October. As of the first quarter of 2014, Twitter’s advertising revenue totaled $226 million, an increase of 125 percent over the previous year. Twitter doesn’t break down where that revenue comes from, but the quarterly report says 78 percent of Twitter’s users access the site from a mobile device, meaning mobile ads are increasingly valuable.

MoPub operates its exchange services independently, so its is open to any ad client. For example, MoPub can work with Facebook on its new ad exchange, the Facebook Audience Network. Here, both Facebook and Twitter come out with revenue in their pockets: FAN gets its ads served, and MoPub rakes in the income from the exchange.

“When we started the company, it was small- to medium- sized developers who had a problem,” Payne, who is now VP of Exchange at Twitter, explained. “We’re finding that now, as the world becomes a mobile-first or mobile-only world, even large publishers, big media companies — the Condé Nasts of the world — are in need of the same technology solution.”

How does it help Twitter?

Since its acquisition, MoPub has continued to operate its marketplace under Twitter’s umbrella. Payne says that the benefit of Twitter’s presence within MoPub’s business is two-fold: MoPub helps Twitter sell its promoted tweets, while Twitter helps MoPub access a wider network of users.

Twitter provides MoPub a “live supply,” Payne said — “the Twitter client, the Twitter user base, and all the engagement that’s going on inside of Twitter that can be accessed by the buyers that flow into our marketplace.”

In an ideal use case, Twitter would receive data from its user base, and MoPub could use that information to serve ads on Twitter as well as across multiple apps. Payne says the company could serve ads that don’t jeopardize privacy — for example, creating a user profile based on interests and who they follow.

Additionally, Payne says, MoPub’s business isn’t dependent on the growth of Twitter’s platform, because it can glean this data without needing every user to be on the Twitter platform: “We want to be able to do analysis and know, ‘Well there’s a user that has these applications.’ Based on a Twitter user who has those same applications, we can infer that they’re similar even though we don’t know that the first user is on Twitter.”

An example of an ad served by MoPub on Flipboard

There’s also the rising trend of native ads in mobile — something that Twitter has jumped on with the acquisition of Namo Media. Native mobile ads are different from traditional ads because they fit right into the design of the apps. Payne wouldn’t comment on Namo Media directly, but it’s likely that native ads will offer brands even richer real estate within apps, meaning more money for Twitter overall.

So what does it all mean?

Twitter’s investment in MoPub (and, by extension, Namo) is the company’s first step in expanding and changing its business. While MoPub does offer Twitter immediate benefits, the power the company has outside Twitter is an important piece of the puzzle. Over time, MoPub’s marketplace could become even more important, because it can work outside of Twitter’s platform to serve and facilitate ads across all kinds of apps.

But, MoPub will still face more competition: While Google is in the easiest position to swipe MoPub with its DoubleClick program, Facebook is also looking closely at app ads. MoPub has a head start in reaching the future of mobile ads, but building the future takes time. Twitter still has a lot of present issues with its own platform to juggle, like directing its media business and promoting user growth.

MoPub’s existence is representative of Twitter’s shift from its calling card as a social media provider to carve out a new role in mobile overall. It’s a tricky venture that involves a lot of change, but it could successfully quiet mounting doubts about the company’s direction in the long run.